Middle East bucks poor growth figures for global personal wealth

26 June 2019Consultancy-me.com

Global growth in personal wealth hit a wall last year according to Boston Consulting Group’s most recent analysis, with the Middle East the only region to buck the trend.

According to the latest annual global wealth report released by strategy and management consulting leader BCG, the world’s collective personal wealth rose by just 1.6 percent last year – down by more than 5 points on 2018 to notch the weakest performance in the past five years. The Middle East however was the only region worldwide not to have witnessed slowed growth against the 2013 to 2017 figure.

Following a bumper 2017 – which saw private wealth grow by 7.5 percent globally (and 11 percent in the Middle East) – the total global pool now stands at just under $206 trillion, yet according to BCG asset values actually declined for the first time since 2008 if other factors such as a rebounding US dollar are taken into account. The firm cites poor equity market performance as being the greatest contributing factor to last year’s slow-down.

And not only on a year-to-year basis against 2017, the 1.6 percent growth rate last year was also well below the five-year compound annual rate (CAGR) of 6.2 percent registered from 2013. Here though, while wealth growth in North America (which at 5.6 percent experienced a similar climb to the Middle East over that five-year period), dropped to just 0.4 percent last year, the Middle East recorded a rate of 5.7 percent – supported by solid local stock markets.

The Middle East, which altogether now has a personal wealth pool of $3.7 trillion, also has close to the highest relative share of investable assets – wealth consisting mainly of equities, investment funds, currencies and deposits, and bonds – roughly on par with Asia at around 82 percent. Europe, in comparison, has a fifty-fifty wealth split between investable assets and non-investables such as life insurance, pension funds, and equity in unlisted companies.

BCG however expects a healthy rebound globally, with the firm’s detailed modelling (using a variety of macroeconomic and market indicators and testing for both bull and bear market scenarios) projecting a global 2018 to 2023 CAGR of 5.7 percent – the Middle East pegged for growth of 6.9 percent over this period, with regional personal wealth reaching a combined $5.2 trillion in 2023 to be closing in on the collective wealth of Oceania.

In terms of who holds that wealth, BCG also projects that financial assets will continue to concentrate among the world’s millionaires – expected to reach 27.6 million in number by 2023 and who already together control half of the total personal wealth held by the planet’s 7.5 billion people. As to the Middle East, the concentration is even more profound, with the region’s ~52 billionaires accounting for nearly a quarter of all local wealth (23 percent).

Yet, one question according to the firm remains; “whether the pullback in wealth growth is a precursor to deeper changes?” In response, the report states that its analysis of major segments, markets, and wealth manager performance suggests that a number of shifts are indeed underway – including a projected above-average five-year 6.2 percent CAGR for investable wealth in the ‘affluent’ band, those with assets of between $250,000 and $1 million.

Consisting of 76 million people globally, the number of these affluent individuals in the Middle East is forecast to grow by 5.3 percent to an estimated 1,265,000 by 2023 – however that projection has been significantly revised down from last year’s report, when expectations were that the affluent wealth class in the Middle East would climb by 14.1 percent between 2017 and 2022 and top 1,460,000. The global figure has also come down though, likely due to this year’s slow growth.